By Joel Warner
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Spam king Scott Richter has never been accused of thinking small. Even his company's bankruptcy promises to be big, big, big -- realbig.
Last month, the wacky saga of Richter's e-mail marketing company, OptInRealBig, entered a new chapter: Chapter 11 bankruptcy protection. Although the Westminster-based company has little actual debt at present, Richter is seeking to shield the company from the fallout of a dozen pending lawsuits -- all of them triggered by the lucrative practice of sending millions of messages to Internet users, hawking diet pills, arousal creams, patriotic paraphernalia and more, more, more.
Once ranked by anti-spam groups as the third-largest source of spam in the world, OptInRealBig has seen its revenues soar over the past two years. According to recently filed documents in the bankruptcy case, the company had gross income of $19.6 million last year, more than double its 2003 take of $7.9 million. It reaped $11.4 million in just the first three months of this year. And Richter, the company's 33-year-old founder and driving force, received more than $1.2 million in salary and other compensation in the past fifteen months.
Richter has always insisted that his mailings are perfectly legal and that his lists of millions of e-mail addresses target people who've "opted in" to receive commercial offers, whether they know it or not. But his bid for legitimacy foundered late in 2003, when Microsoft and New York Attorney General Eliot Spitzer filed lawsuits against OptInRealBig and two other companies, claiming the group had sent millions of fraudulent e-mails over hijacked servers around the globe ["Mr. Spam Man," January 29, 2004]. Spitzer vowed to drive the spammers into bankruptcy.
The combative Richter fought back in the press, blaming his troubles on unscrupulous partners and Spitzer's hubris. "You can't say you're going to bankrupt a business," he told Westword. "I say bring it on."
Last year, Richter settled Spitzer's lawsuit, which had sought up to $20 million in damages, for a mere $50,000. But the Microsoft suit appears headed for trial; it's listed in the bankruptcy as a "disputed" claim for another $20 million. OptInRealBig is also facing suits from various individuals in Utah, California and Washington who are seeking damages over unwelcome e-mail. In addition, the company is battling its own insurer, American Family Insurance, over whether the company is obliged to defend Richter from the other claims.
OptInRealBig attorney Steven Richter, who also happens to be Scott's father, didn't respond to a request for comment about the bankruptcy -- but Microsoft plans to be an active creditor in the proceedings. "We are determined to pursue Mr. Richter and his company in the bankruptcy, and we will be examining all potential strategies," says Aaron Kornblum, Microsoft's Internet safety enforcement attorney. "We don't feel this bankruptcy is a way to cleanse Mr. Richter for sending this illegal mail."
If OptInRealBig should end up in a real big liquidation, there aren't a lot of hard assets for creditors to seize. The company does have $162,185 worth of computers on the premises and a unique product inventory, leftovers of the e-mail promotions and come-ons that made Richter a very rich guy. These include 45 Chinese "health balls," valued at $.95 apiece; 107 pocket violins, valued at $1.65 each; 573 strobe keychains, $1.25 each; 602 finger-flicking footballs, $.65 a pop; and 21,533 units of "Easy Cream Body Sculpture," for a total estimated resale value of $96,898.50.
Also in the mix: 168 extra-large "God Bless America" T-shirts. Resale value: zero.